Global Economy Bursting?

[Big ole Boy]

Flesh lips of a Keynesian

And the word became flesh - and the flesh lips of the Keynesian poured out its information.

Control and command - all governments across the globe must have control

So as we sit cloistered on a our computers waiting for the next tid bit from the Super-Orwellian complex - all political parties .....the UN

... give us our orders sirs, maams,

....

 

[Terrel L. Shields]

INTERESTING discussion

Over the past 30 years or so, the American “baby-boomer” generation has fattened up the U.S. working-age population. That’s kept the dependency ratio low and resulted in much of the growth since World War II. Unfortunately, this will come back to haunt us…

The baby boomer's grandchildren have reached zero population growth...actually negative growth and getting worse during the recession. Europe went negative growth before the turn of the century. The actual increase is demographic- immigrants - 20% or so of our population is making up the difference, many of them illegal (it's classic move for pregnant women to try to have their baby in a U. S. hospital to get the child U. S. citizenship.) Thus the population growth is in the very demographic we need the least...the lower middle class and poor.

Therefore they are not as productive as they once were. ...
Most of the work done today by the population does not require physical exertion; it is largely sedentary

Actually Wal-Mart hires older workers for one reason. They are more productive. In part, that they have maturity and will stick to a job. Like they say, old age and craft will overcome youth and skill. But the average truckdriver (hardly a sedentary job) is not young. The average warehouse worker, again, I've been in those places and they are not young. Tha average farmer? I think the age of the average farmer today is over 60. Again, it's a blanket statement to say the physical jobs are all held by younger tougher folks.
The reason there are more young in construction was that during the boom, the ranks of the young filled up the jobs and they are kinda stuck in the industries that they trained in or they have to retrain or find other manual work...tough to do when plants are laying off. As for layoffs, in older plants with older workforce, the newly laid off are almost unhirable anywhere else.

Today in the oil patch, an experienced worker that is 60 can get a job as fast or faster than one who is 25. They lack experienced help. They lack "old time" skills that many people obtained in the 1970s and early 1980s. Even I have been offered a job not to distant to return to work as a consultant and, in fact, did a consulting job on a rig a couple of years ago. I enjoyed it. They paid $500 a day, 7 days a week and not a stip one. Yeah, not a real physical job but the problem with any oil field work has always been that you traveled a lot, and moved a lot. It was never about the physical part except for the lowest level of jobs and, again, those folks tend to move up the ranks as they got older anyway.

Roughnecks become drillers. Drillers become tool pushers. Pushers became superintendents. Supers become Consultants. If you are good at sales, you can name your price as a service rep pushing drill bits, chemicals, parts, goods and services.

But as the bible says, "time and chance taketh all". The older you are the more likely to get sick, disabled or die. The older you are, the more opportunities you have to do something more profitable or easier. Drive thru the mountains of Colorado and get acquainted with the Bed & Breakfast owners, the small store owners, the people who run RV parks. A lot of them were engineers, teachers, professionals. They burned out and wanted to do something or live somewhere. The same for farmers. Many a college educated person moved "back home" to run the farm after a death in the family. I knew a lawyer whose father had a large farm and was the local lawyer and title company is an E. Arkansas county with a sparse population. His dad died suddenly. This Columbia educated investment banker, then a VP in a Memphis commercial bank, quit and took over the family farm, got his law degree at night driving to Little Rock to classes.

In the 30's and before, the old farmer tended to live with a child and do what they could do (milk the cow, feed the calves, etc.) or move to town and run a small store. Every wide spot around had a store. You traded milk and eggs for goods, and the merchant traded those to traveling "jobbers" or locals who had no eggs or milk. Once trucks become common, milk routes collected milk.

I was in an RV a few years ago and stopped in Westcliffe, CO. A Texas businessman built and ran an RV park because he was "tired of running a C store". He turned it over to his son and worked this job in the place he liked to live in the summer from May to Oct. People are pretty flexible about what they will and can do.

But the older people who were retiring 10 - 20 years ago at age 55 are now in some cases going back to work part time. And few people feel good about retiring before Medicare kicks in. Health insurance costs have prevented a host of people from retiring. A friend who has had bypass gets insurance thru his wife's teaching job. She would like to quit but if she does, they will be out over $1,400/month for insurance. I would retire today but my insurance is $1,245 a month...and is $5000 deductable. No one wants to take me on and I've been with this group policy since 1977.

The problem I face is that my "assets" are a farm. It makes very little money without more active management, management time i don't have. I didn't stop raising cattle because I got too old...I quit because I was running out of time. Feeding cattle after dark is the pits. Finding a sick cow you should have found yesterday strikes at the very heart of my farm ethic. If I cannot take care of them, I don't need to keep 'em.

Even with most of the place leased, saturday evening I spent bushhogging very carefully around my pond banks. Hitting a rock could spark a fire, but I waited uptil the sun was setting and humidity was rising.

The problem with health care is that people are living longer...but not necessarily healthier lives. Many who would have died of diabetes and heart disease continue to live for years, even decades. Yes, life expectancy is higher but at some point arthritis, cardivascular, and other issues will force you to slow or stop entirely...and we have the means to keep you propped up (often in misery) long after you would have died otherwise.

 

[Randolph Kinney]

INTERESTING discussion
The baby boomer's grandchildren have reached zero population growth...actually negative growth and getting worse during the recession. Europe went negative growth before the turn of the century. The actual increase is demographic- immigrants - 20% or so of our population is making up the difference, many of them illegal (it's classic move for pregnant women to try to have their baby in a U. S. hospital to get the child U. S. citizenship.) Thus the population growth is in the very demographic we need the least...the lower middle class and poor.

Some people worry that kind of information can't be trusted because of a political agenda.

And it all comes from government subject to interpretation and spin. However, the consequences are real and people can see the results over time.

Actually Wal-Mart hires older workers for one reason. They are more productive. In part, that they have maturity and will stick to a job. Like they say, old age and craft will overcome youth and skill. But the average truckdriver (hardly a sedentary job) is not young. The average warehouse worker, again, I've been in those places and they are not young. Tha average farmer? I think the age of the average farmer today is over 60. Again, it's a blanket statement to say the physical jobs are all held by younger tougher folks.
The reason there are more young in construction was that during the boom, the ranks of the young filled up the jobs and they are kinda stuck in the industries that they trained in or they have to retrain or find other manual work...tough to do when plants are laying off. As for layoffs, in older plants with older workforce, the newly laid off are almost unhirable anywhere else.

Today in the oil patch, an experienced worker that is 60 can get a job as fast or faster than one who is 25. They lack experienced help. They lack "old time" skills that many people obtained in the 1970s and early 1980s. Even I have been offered a job not to distant to return to work as a consultant and, in fact, did a consulting job on a rig a couple of years ago. I enjoyed it. They paid $500 a day, 7 days a week and not a stip one. Yeah, not a real physical job but the problem with any oil field work has always been that you traveled a lot, and moved a lot. It was never about the physical part except for the lowest level of jobs and, again, those folks tend to move up the ranks as they got older anyway.

The point I was making is that many construction trades require not only travel but physical exertion.

I have several friends that use to work construction that now work at Wal-Mart, Home Depot, Lowes, and retail in general. They can't work construction; they are too old.

But the older people who were retiring 10 - 20 years ago at age 55 are now in some cases going back to work part time. And few people feel good about retiring before Medicare kicks in. Health insurance costs have prevented a host of people from retiring. A friend who has had bypass gets insurance thru his wife's teaching job. She would like to quit but if she does, they will be out over $1,400/month for insurance. I would retire today but my insurance is $1,245 a month...and is $5000 deductable. No one wants to take me on and I've been with this group policy since 1977.

You are stating the obvious problem that happens when the dependent population ratio increases because of the elderly population increases. Someone has to support health insurance costs. Guess who? Either go back to work or get government program support, which comes from the employed population in the way of taxes.

The problem with health care is that people are living longer...but not necessarily healthier lives. Many who would have died of diabetes and heart disease continue to live for years, even decades. Yes, life expectancy is higher but at some point arthritis, cardivascular, and other issues will force you to slow or stop entirely...and we have the means to keep you propped up (often in misery) long after you would have died otherwise.

Yes indeed, people worldwide are living longer, even in less developed countries.

The problem going forward is a slowing down and eventually a reversal of immigration from lesser developed countries to more developed countries.

My mother-in-law was in an assisted living facility and had been for 13 years before she died. Not one Caucasian for employees; management was Caucasian. Lots of Filipinos and Mexican, all first generation immigrants with broken English. They work cheap and do the dirty work of elder care.

 

[Randolph Kinney]

One demographic measure which should certainly be examined in its relation to markets is the dependency ratio which measures the number of dependents per working adult (it is the sum of people under 14 and over 65, divided by the number of people aged 15-64). The table (compiled from a UN 2010 report) shows the ratio (per 100 people) for various countries and regions. A declining ratio is generally positive for the economy because income earners have fewer dependents and can divert dollars to investing and spending.

The world's dependency ratio which fell steadily from 1970 to 2010 will be essentially flat until 2020-30 and will start to rise beyond 2030. In the US and Europe, the ratio hit bottom around 2010 and will rise in future decades. But in Japan, it hit bottom in 1990 and has been rising ever since. Perhaps this explains in part Japan's lost decade which turned into two lost decades.

In the BRIC countries, the dependency ratio is still falling in Brazil and India, but it is near bottom and is set to rise in Russia and China. And in Africa, the ratio will continue to fall for a long time.

As the ratio rises, there will be fewer dollars to spend on discretionary items because more of these dollars will have to be redirected to taking care of dependents, whether this is done directly through assisting family members or indirectly through charities or government social programs.

Which brings us back to luxury goods, in some ways the quintessential discretionary items. Will a rise in the dependency ratio in developed countries, in Russia and in China lead to a slowdown for the sector?

Looking into the future, the case of Japan can be informative. It was not long ago that the Japanese were avid buyers of luxury goods, both at home and while traveling. But a 2009 study by McKinsey found that the Japanese appetite for luxury goods has been on the wane since 2001 (in volume terms) and it noted that their purchases started to decline (in currency terms) in mid-2006, two full years before the onset of the financial crisis.

Whether by coincidence or causality, the demographic data fits well with this turn of events. Because of a low birth rate and an ageing population, Japan's dependency ratio, 0.43 in 1990, rose modestly to 0.47 by 2000 and more briskly to 0.56 by 2010. It is on its way to 0.7 in 2020.

The dependency ratio is bottoming in Russia and China but it will only rise slowly for the next 10 to 15 years. This suggests that, barring other developments, the luxury sector could continue to do well, but its growth rate may taper off. Of all the BRIC countries, India's ratio looks the most promising and it offers the best longer term profile if its policymakers can set the country on a path to reap the demographic dividend resulting from a decline in its fertility rate. Although luxury companies have a presence in India, their footprint is much smaller than in China and Japan. For example, Louis Vuitton has over 50 stores in Japan, 39 stores in China and 4 in India.

Africa will see a steady decline of its dependency ratio in the 21st century. Luxury companies have a small to nonexistent presence on the continent. Swatch Group records a minuscule 0.6% of its sales there. Louis Vuitton has three stores, of which two in South Africa and one in Morocco, but none in oil-rich Angola or Nigeria. Porsche (PAH3.DE trades in Frankfurt) has seven 'Porsche Centres' in Africa, of which three in South Africa and one each in Angola, Nigeria, Egypt and Ghana. But it has 42 'Centres' in China, 23 in Russia and 8 in Brazil. Although store count is an incomplete measure (because of sales through third party outlets), a larger number of own-brand stores denotes a greater confidence in the stability and growth of a given market. If Africa is the next economic frontier, these are indeed very early days for luxury goods companies on the continent.

They should sit up and take note. A team led by Hinh T. Dinh, Chief Economist at the World Bank, recently examined Africa's prospects as a new manufacturing hub.

 

[Randolph Kinney]

Boomer Retirement: Headwinds for U.S. Equity Markets?

FEDERAL RESERVE BANK OF SAN FRANCISCO

http://www.frbsf.org/publications/economics/letter/2011/el2011-26.html

Historical data indicate a strong relationship between the age distribution of the U.S. population and stock market performance. A key demographic trend is the aging of the baby boom generation. As they reach retirement age, they are likely to shift from buying stocks to selling their equity holdings to finance retirement. Statistical models suggest that this shift could be a factor holding down equity valuations over the next two decades.

 

[Terrel L. Shields]

Because of a low birth rate and an ageing population, Japan's dependency ratio, 0.43 in 1990, rose modestly to 0.47 by 2000 and more briskly to 0.56 by 2010. It is on its way to 0.7 in 2020.

Again, Japan has had not one, but 2 lost decades and are likely to have yet a 3rd, even 4th. Many many Japanese are remaining unmarried right through the years normally spent having a family.

For the U. S. - politically uncorrect as it is to say it - we are on our way to seeing the Spanish to retake the SW within one generation, and the entire nation within 2. The majority of American babies will be non-white. With it, the real question is will a rising tide lift all boats?

No one should question the work ethic of Asians. Africans, or Hispanics. But neither do I question the fact that the latter 2 groups are the groups most likely to tap into the government largess. The group less likely to carry home, car, and health insurance. The groups with the highest incidence of drug abuse, jail time, and being victims of crime as well as committing it.

Asians, on the other hand, seem to be more likely to score higher on tests than even whites, go to college more than other ethnic groups, and frankly, if the U. S. is racist, why are Asians succeeding and excelling in America when measured not only against blacks and hispanics..but whites as well. What motivates them? What fails to motivate the blacks and hispanics...when compared to the norm (which is white centered because whites remain the "norm" in a statistical sense.)

If poverty begats poverty, then explain the immigres' from Vietnam who came here with the clothes on their back.

strong relationship between the age distribution of the U.S. population and stock market performance

Years ago, maybe 12-15 yr. or so...there was a speaker going the rounds with his megatrends book. Naisbett, maybe. One of his arguments was that baby boomers created a sort of bubble that is working its way thru the economy and was at a near peak. In his mind once the boom generation begin to retire, things would go south. One aspect of that would be that equities would lag the performance of commodities. We've seen that. From record low prices for food, oil, and metals (on an inflation adjusted basis) prices will rise dramatically and stocks will languish. Jim Rogers was one of those who saw the wave of commodity use going up while supply remained cheap and profited from the shift back in favor of commodities.


Futurists are always vague about predictions but I see the prospect that the U. S. and Europe will lag the world "global" economy during this century and the "new kid" on the block may well be Africa. Clearly if the cost of production increases in Asia, the logical choice is to move your manufacturing to African countries. Only political unstability has prevented that already.

 

[DMZwerg]

Too bad you don't bother to read, you just make bogus claims.

So, you are saying the graph actually starts before 1950 like the data rather than starting around 1970 and thus is NOT drawn to convey emotion far in excess of the of the actual data? (AKA dependency ratio even based on age 64 cut off was much higher in the 50's than it will reach by 2050)
You are saying the graph does NOT start at 45% rather than zero, again to create the emotion of something far more out of "standard" than it really is?

The graph is bupkis. It is bias and designed to create an emotional response.

The data in PDF form is suspect at best because there are no formula, suppositions, or such attached to the presented data itself. You proved this by pulling it out of context and presenting it without the full context.

Note that both the graph and the data present a forecast of the future, and based on prior data very close to a worst case projection AFAICT.

I hope that makes it clearer to you why I am saying the graph is beyond misleading. (aka, the graph is sliced vertically and horizontally and the remainder presented to create the maximum emotional response, and the data forecasts without any small print explaining how this forecast was made.


Would you appraise a house as of a future date, and appraise it for significantly more than current value, and present such a report WITHOUT any base information on the trends behind it (both increase and decline rates and changes thereof)?
The problem is neither the graph nor the PDF of the data come with the proper annotations typical in statistics nor those typical for science ... the who, what, where, when how and why. In appraiser terms the graph is basically an unsigned BPO with only the subject & price opinion listed and the data is a BPO with the raw data but not of the adjustments nor support and the signature is only the name of the firm attached.

Did you read the Harvard research paper that was posted for sources, methods and references?

Take a look:

That is part of what I would have expected INSIDE the data PDF, and I would have expected at least a reference to the data PDF or report taken from at the bottom of the graph. Without these they are both meaningless.



Oh yeah, just a couple of points:
1) With illegal Mexican immigrants in the US the largest problem now is the shear number of migrant workers TRAPPED in the US and unable to leave efficiently without proper paperwork (aka, their families can not afford financially to have them sit in jail for 8+ weeks or months while they are being processed out).
2) The real problem with dependent populations is not the ratio between workers and "dependents" but that there is a great difference between the costs of the different types of "dependent" populations ... younger dependent populations will theoretically age out with a set cost per year that is likely declining after birth whereas aging dependent populations have GROWING medical costs before they "age out" (and any debt left behind when they do so is often eaten by the government).



I said the graph was bupkis and the data was suspect, not that I did not understand the underlying concerns.

 

[Randolph Kinney]

That is part of what I would have expected INSIDE the data PDF, and I would have expected at least a reference to the data PDF or report taken from at the bottom of the graph. Without these they are both meaningless.

Just like O. J. Simpson, who did not know who killed his wife, you do not know where academia and the United Nations get their data from or the methods used to project trends. Do you need my help? :icon_lol:

I said the graph was bupkis and the data was suspect, not that I did not understand the underlying concerns.

Your claim about the graph and data cannot be taken seriously unless you can present an alternative that supports your claim.

I am waiting.

 

[Randolph Kinney]

Futurists are always vague about predictions but I see the prospect that the U. S. and Europe will lag the world "global" economy during this century and the "new kid" on the block may well be Africa. Clearly if the cost of production increases in Asia, the logical choice is to move your manufacturing to African countries. Only political unstability has prevented that already.

Reciting history, in the 70s and 80s, the U.S went from being a net creditor nation to a net debtor nation. Japan went to becoming a net creditor nation, all financed by its the trade surplus.

Then came the seven Asian Tiger nations: Korea, Taiwan, Singapore, Hong Kong, Thailand, Indonesia, Malaysia. These nations and areas were notable for maintaining exceptionally high growth rates (in excess of 7 percent a year) and rapid industrialisation between the early 1960s and 1990s. By the 21st century, four (Hong Kong, Singapore, South Korea and Taiwan) have developed into advanced and high-income economies, specializing in areas of competitive advantage.

Then came China and India.

The BRIC nations (Brazil, Russia, India and China) are all deemed to be at a similar stage of newly advanced economic development.

Goldman Sachs has argued that, since the four BRIC countries are developing rapidly, by 2050 their combined economies could eclipse the combined economies of the current richest countries of the world. These four countries, combined, currently account for more than a quarter of the world's land area and more than 40% of the world's population.

On June 16, 2009, the leaders of the BRIC countries held their first summit in Yekaterinburg, and issued a declaration calling for the establishment of an equitable, democratic and multipolar world order. Since then they have met in Brasília in 2010, met in Sanya in 2011 and in New Delhi, India in 2012.

They hold a combined GDP (PPP) of 18.486 trillion dollars. On almost every scale, they would be the largest entity on the global stage. These four countries are among the biggest and fastest growing emerging markets.

In late 2010, China surpassed Japan's GDP for the first time, with China's GDP standing at $5.88 trillion compared to Japan's $5.47 trillion. China thus became the world's second-largest economy after the United States.

One thing all these nations have in common with the U.S.: a trade surplus. And a better dependent population ratio than the U.S. going forward.

 

[Terrel L. Shields]

(Brazil, Russia, India and China)

None of those countries have a good track record of staying on "the shining path" for very long. We will see what transpires but clearly after over 30 years of trade deficits, we are not progressing. Should we be able to reduce our trade dependence on oil by converting to gas and applying frack techniques, we could get back on a path to trade surpluses. But that technology will eventually work in many of the OPEC countries as well as elsewhere making us less competitive (price wise) and inviting increased oil use. If we do not use this brief interlude to reduce energy consumption and build nuclear power plants like mad (the only truly economic alternative now) I predict that many states will achieve the goal of 20% "renewables" by 2020 only by sleight of hand. "borrowing" green energy from elsewhere and "selling" their own fossil fueled electricity in hokey trades. Does anyone really believe that wind generated electricity in Wyoming is going to make it all the way to Minnesota?

India, in particular, innovative and educated as they are, has a nanny state mentality that encourages state-controlled economies and currently is hurting itself. China is dependent upon the state making the right decisions rather than the market. How long can that last before the state makes a boo-boo. Ditto Russia which seems to be de-evolving to a place no one is willing to invest in because of fraud and government taking over any business that proves to be lucrative.